CHAPTER 1: INTRODUCTION

An annual report is a comprehensive report on a company's activities

throughout

the

preceding year.

Annual

reports

are

intended

to

give shareholders and other interested people information about the company's
activities and financial performance. Most jurisdictions require companies to
prepare and disclose annual reports, and many require the annual report to be filed
at the company's registry. Companies listed on a stock exchange are also required
to report at more frequent intervals (depending upon the rules of the stock
exchange involved).
Typical annual reports will include:

Balance sheet

Cash flow statement

Profit and loss account

Notes to the financial statements

Director's Report

Operating and financial review

Other features

Auditors report
Other information deemed relevant to stakeholders may be included, such

as a report on operations for manufacturing firms or corporate social

responsibility reports for companies with environmentally or socially sensitive
operations. In the case of larger companies, it is usually a sleek, colorful, highgloss publication.
The details provided in the report are of use to investors to understand the
company's financial position and future direction.

OBJECTIVE OF THE STUDY

To study what is meant by annual report

To study what is directors report
To study what is auditors report
To study what is management discussion & analysis report
To study financial statements of a company

RESEARCH METHODOLOGY

RESEARCH DESIGN:
This is a descriptive research as it will clarify the what is annual
report. It would give us a clear picture on the annual report of ASHOK
LEYLAND.

SOURCES OF DATA COLLECTION:

SECONDARY DATA:
Online reports related to ANNUAL REPORT ON ASHOK
LEYLAND

RESEARCH TECHNIQUE:
ANALYSIS:
Detailed examination of available pieces of information with a
view to better understanding of a topic.

CHAPTER 2: COMPANY PROFILE OF ASHOK LEYLAND

Ashok Leyland is an Indian automobile manufacturing company based

in Chennai, India. Founded in 1948, and it is Second largest commercial vehicle
manufacturers of commercial vehicles, such as trucks and buses, as well as
emergency and military vehicles. Operating six plants, Ashok Leyland also makes
spare parts and engines for industrial and marine applications. It sells about
60,000 vehicles and about 7,000 engines annually. It is the second largest
commercial vehicle company in India in the medium and heavy commercial
vehicle (M&HCV) segment with a market share of 28% (200708). With
passenger transportation options ranging from 19 seaters to 80 seaters, Ashok
Leyland is a market leader in the bus segment. The company claims to carry over
60 million passengers a day, more people than the entire Indian rail network. In
the trucks segment Ashok Leyland primarily concentrates on the 16 ton to 25 ton
range of trucks. However Ashok Leyland has presence in the entire truck range
starting from 7.5 tons to 49 tons. The joint venture announced with Nissan
Motors of Japan would improve its presence in the Light Commercial Vehicle
(LCV) segment (<7.5 tons).
Ashok Leyland's UK subsidiary Optare has shut down its bus factory in
Blackburn, Lancashire. This subsidiary's traditional home in Leeds has also been
vacated in favour of a purpose built plant at Sherburn-in-Elmet.

HISTORY:
Indias first Prime Minister Nehru, persuaded Raghunandan Saran, an
industrialist, to enter automotive manufacture. The company began in 1948
as Ashok Motors, to assemble Austin cars. The company was renamed and started
manufacturing commercial vehicles in 1955 with equity participation by Leyland
Motors. Today the company is the flagship of the Hinduja Group, a British-based
and Indian originated transnational conglomerate.

Early products included the Leyland Comet bus which was a passenger
body built on a truck chassis, sold in large numbers to many operators, including
Hyderabad Road Transport, Ahmedabad Municipality, Travancore State
Transport, Maharashtra State Transport and Delhi Road Transport Authority. By
1963, the Comet was operated by every State Transport Undertaking in India, and
over 8,000 were in service. The Comet was soon joined in production by a version
of the Leyland Tiger.
In 1968, production of the Leyland Titan ceased in Britain, but was
restarted by Ashok Leyland in India. The Titan PD3 chassis was modified, and a
five speed heavy duty constant-mesh gearbox utilized, together with the Ashok
Leyland version of the O.680 engine. The Ashok Leyland Titan was very
successful, and continued in production for many years.
In 1987, the overseas holding by Land Rover Leyland International
Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja
Group, the Non-Resident Indian transnational group and IVECO Fiat SpA, part of
the Fiat Group and Europe's leading truck manufacturer. Ashok Leylands longterm plan to become a global player by benchmarking global standards of
technology and quality was soon firmed up. Access to international technology
and a US$200 million investment programme created a state-of-the-art
manufacturing base to roll out international class products. This resulted in Ashok
Leyland launching the 'Cargo' range of trucks based on European Ford
Cargo trucks. These vehicles used Iveco engines and for the first time had factoryfitted cabs.
In the journey towards global standards of quality, Ashok Leyland reached
a major milestone in 1993 when it became the first in India's automobile history
to win the ISO 9002certification. The more comprehensive ISO 9001 certification
came in 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle
manufacturing units in 2002. In 2006, Ashok Leyland became the first automobile
company in India to receive the TS16949 Corporate Certification.

CURRENT STATUS:
Ashok Leyland is the second technology leader in the commercial vehicles
sector of India. The history of the company has been punctuated by a number of
technological innovations, which have since become industry norms. It was the
first to introduce multi-axled trucks, full air brakes and a host of innovations like
the rear engine and articulated buses in India. In 1997, the company launched the
countrys first CNG bus and in 2002, developed the first Hybrid Electric Vehicle.
The company has also maintained its profitable track record for 60 years.
The annual turnover of the company was USD 1.4 billion in 2008-09. Selling
54,431 medium and heavy vehicles in 2008-09, Ashok Leyland is India's largest
exporter of medium and heavy duty trucks. It is also one of the largest private
sector employers in India - with about 12,000 employees working in 6 factories
and offices spread over the length and breadth of India.
The company has increased its rated capacity to 105,000 vehicles per
annum. Also further investment plans including putting up two new plants - one
in Uttarakhand in North India and a bus body building unit in middle-east Asia are
fast afoot. It already has a sizable presence in African countries like Nigeria,
Ghana, Egypt and South Africa.
In 2010 Ashok Leyland acquired a 26% stake in the British bus
manufacturer Optare, a company based on the premises of a former British
Leyland subsidiary C.H.Roe. In December 2011 Ashok Leyland increased its
stake in Optare to 75.1%.
The Hinduja Group also bought out IVECO's indirect stake in Ashok
Leyland in 2007. The promoter shareholding now stands at 51%. Leyland has a
state of the art research and development center at Vellivoyal Chavadi which is
located near Chennai. Hinduja Group flagship company Ashok Leyland has been
awarded the first overseas order worth $6 million for its vestibule buses
from Bangladesh Road Transport Corporation (BRTC).

CHAPTER 3: DATA COLLECTION

DIRECTORS REPORT:
Part I - Performance / Operations
The Directors have pleasure in presenting the Annual Report of the Company,
together with the audited Financial Statements, for the year ended March 31, 2013
Dividend
The Directors recommend a dividend of 60% (` 0.60 per equity share of ` 1/-) for
the year ended March 31, 2013.
Company Performance
The year under review saw a slowdown in the Indian economy with a consequent
adverse impact on the commercial vehicle industry. Whilst the overall volume
declined by 2% year over year, the medium & heavy duty segment clocked a 25%
drop. Despite the above, your Company increased its market share from 23.5% to
26.5% in the M&HCV segment.
In the Light Commercial Vehicle (LCV) segment, Dost continued to grow in
volumes. The performance of Power Solution Business and Spares have been very
encouraging. Export volumes dropped primarily due to the setback in Sri Lanka
which could not be fully recouped in other geographies.
Research

and

Development

(R&D),

technology

absorption,

energy

conservation etc.
Your Company continues to focus on Research and Development activities with
particular reference to development of competitive products with accent on
performance, fuel efficiency, emission and ride comfort.
Expenditure incurred by way of capital and revenue on these activities are shown
separately.

Long Term Borrowings:

Secured Non-Convertible Debentures
During the year, your Company issued Secured Non-convertible Debentures to
the tune of ` 350 Crores for a tenor of 3 years (NCD Series AL 17 for ` 200 Crores
and NCD Series AL 19 for ` 150 Crores) and ` 250 Crores for a tenor of 5 years
(NCD Series AL 18 for ` 100 Crores and NCD Series AL 20 for ` 150 Crores)
aggregating to `600 Crores for FY 2012-13. During the year, no Secured NonConvertible Debenture had fallen due for redemption.
External Commercial Borrowings (ECBs)
Your Company contracted ECBs in Japanese Yen, equivalent to USD 60 Mn,
during FY 2011-12 and USD 115 Mn in 2012-13 from Banks for an average tenor
of 5 to 5.6 years (Door to door of 6 to 7 years) on unsecured basis and USD 110
Mn was utilized during FY 2012-13. The funds drawn under ECBs were utilized
to fund capital expenditure programme of the Company and other approved end
uses as per extant RBI guidelines and the terms of the loan.
Your Company repaid ECB loan instalments that fell due, in Japanese yen,
equivalent to USD 81.66 Mn and USD 16.66 Mn during FY 2012-13.

Part II - Corporate matters Human Resources

Your Company values the human resources, their contribution and potential, as
one of the foundational pillars for achieving the organisational vision.
Your Companys flagship scheme for seeding internal leadership pipeline has
been re-christened as the Emerging Leaders Programme with a renewed focus to
identify and nurture internal leaders.
Banner projects involving cross-functional teams have benefitted the organisation
in product initiatives, process efficiency and market share improvements.
Your Company has sustained the status as the Most Preferred Employer on
Premier Engineering Institutes, which has facilitated induction of a creamy layer

of talent.
Your Company developed vibrant Industry-Institute collaborative initiatives,
leading to creation of a talent pool, skill and capabilities enhancement.
Shop floor engagement initiatives like Blessing, Knowledge Academy / career
development for associates, have gained momentum, promoting a collaborative
work culture.
Your Company sustained harmonious and healthy industrial relations in all
manufacturing plants.
Corporate Governance
Your Company is fully compliant with the Corporate Governance guidelines, as
laid out in Clause 49 of the Listing Agreement. All the Directors (and also the
members of the Senior Management of the rank of General Managers and
above) have confirmed in writing their compliance with and adherence to the
Code of Conduct adopted by the Company. The Managing Director has issued
certificate of compliance with the Code of Conduct, as required by SEBI
guidelines.
Many of the Corporate Governance Voluntary Guidelines 2009 issued by Ministry
of Corporate Affairs are being followed by your Company.
The Statutory Auditors of the Company have examined the requirements of
Corporate Governance with reference to Clause 49 of the Listing Agreement, and
have certified the compliance, as required under SEBI guidelines.
The information required under Section 217(2A) of the Companies Act, 1956 and
the Rules made thereunder is provided in Annexure forming part of the Report. In
terms of Section 219(1)(b)(iv) of the Act, the Report and Financial Statements are
being sent to the shareholders excluding the aforesaid Annexure. Any shareholder
interested in obtaining copy of the same may write to the Company Secretary.
Related Party disclosures/transactions are detailed in Note 3.5 of the Notes to the
Financial Statements.

Directors
Mr Anil Harish, Mr Sanjay K Asher and Mr Jean Brunol, Directors, retire at the
forthcoming Annual General Meeting and are eligible for re-appointment.
Mr R Seshasayee steps down as Executive Vice Chairman at the expiry of his
term as on 31.03.2013. However, he continues to be a Director and becomes
eligible for
retirement by rotation. He retires at the forthcoming Annual General Meeting and
is eligible for reappointment.
Mr R Seshasayee was appointed as Non-Executive Vice Chairman effective
01.04.2013.
Dr Andreas H Biagosch was appointed as an Additional Director at the Board
Meeting held on May 10, 2013. His term of office expires at the end of the
ensuing Annual General Meeting. The Company has received Notice under
Section 257 of the Companies Act proposing him for appointment as Director of
the Company.
Necessary resolutions are being placed before the shareholders for approval.
Cost Auditors
The Government has stipulated Cost Audit have carried out these audits. Their
findings have been satisfactory. The Audit Committee of the Board has
recommended their re-appointment for the year 2013-14.
Cost Audit Reports for the financial year 2011-12 were filed on January 28, 2013
(due date February 28, 2013).
Auditors
M/s M S Krishnaswami & Rajan, Chartered Accountants and M/s Deloitte
Haskins & Sells, Chartered Accountants, retire at the close of this Annual General
Meeting and are eligible for re-appointment. The Company has received
confirmation from both the firms that their appointment will be within the limits
prescribed under Section 224(1B) of the Companies Act, 1956. The Audit

10

Committee of the Board has recommended their re-appointment for the year
2013-14. The necessary resolution is being placed before the shareholders for
approval.
Acknowledgement
The Directors wish to express their appreciation of the continued co-operation of
the Central and State Governments, bankers, financial institutions, customers,
dealers and suppliers and also the valuable assistance and advice received from
the joint venture partners, the major shareholders Hinduja Automotive Limited,
the Hinduja Group and all the shareholders. The Directors also wish to thank all
the employees for their contribution and continued commitment, support and cooperation through the year.

On behalf of the Board of Directors

Chennai
May 10, 2013

Dheeraj G Hinduja
Chairman

11

INDEPENDENT AUDITORS REPORT:

TO THE MEMBERS OF ASHOK LEYLAND LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of Ashok Leyland
Limited (the Company), which comprise the Balance Sheet as at March 31,
2013, the Statement of Profit and Loss and the Cash Flow Statement for the year
then ended and a summary of significant accounting policies and other
explanatory information.
Managements Responsibility for the Financial Statements
The Management is responsible for the preparation of these financial statements
that give a true and fair view of the financial position, financial performance and
cash flows of the Company in accordance with the Accounting Standards referred
to in Section 211(3C) of the Companies Act, 1956 (the Act) and in accordance
with the accounting principles generally accepted in India. This responsibility
includes the design, implementation and maintenance of internal control relevant
to the preparation and presentation of the financial statements that give a true and
fair view and are free from material misstatements, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit in accordance with the Standards on Auditing
issued by the Institute of Chartered Accountants of India. Those Standards require
that we comply with the ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and the disclosures in the financial statements. The procedures selected
depend on the auditors judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In
12

making those risk assessments, the auditor considers the internal control relevant
to the Companys preparation and fair presentation of the financial statements in
order to design audit procedures that are appropriate in the circumstances. An
audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of the accounting estimates made by Management, as well as
evaluating the overall presentation of the financial statements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, the financial statements give the information required by
the Act in the manner so required and give a true and fair view in conformity with
the accounting principles generally accepted in India:
(a) In the case of the Balance Sheet, of the state of affairs of the Company as at
March 31, 2013;
(b) In the case of the Statement of Profit and Loss, of the profit of the Company
for the year ended on that date; and
(c) In the case of the Cash Flow Statement, of the cash flows of the Company
for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1.

As required by the Companies (Auditors Report) Order, 2003 (the Order)

issued by the Central Government of India in terms of Section 227(4A) of
the Act, we give in the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the Order.

2.
(a)

As required by Section 227(3) of the Act, we report that:

We have obtained all the information and explanations which to the best of
our knowledge and belief were necessary for the purposes of our audit;

(b)

In our opinion, proper books of account as required by law have been kept

13

by the Company so far as appears from our examination of those books;

(c)

The Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement dealt with by this Report are in agreement with the books of
account;

(d)

In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash
Flow Statement comply with the Accounting Standards referred to in Section
211(3C) of the Act.

(e)

On the basis of written representations received from the directors as on

March 31, 2013 and taken on record by the Board of Directors, none of the
directors is disqualified as on March 31, 2013 from being appointed as a
director in terms of Section 274(1)(g) of the Act.

ANNEXURE TO INDEPENDENT AUDITORS REPORT:

On the basis of such checks as we considered appropriate and according to
the information and explanations given to us during the course of our audit, we
report that:
1. (i) The company is maintaining proper records showing full particulars
including quantitative details and situation of fixed assets.
(ii)

The fixed assets are being physically verified under a phased programme
of verification, which, in our opinion, is reasonable having regard to the
nature and value of its assets. However, no material discrepancies have been
noticed during the year on such verification.

(iii)

The company has not disposed off substantial part of its fixed assets
during the year.

2.(i) Inventories have been physically verified during the year by the management
at reasonable intervals.
(ii) In our opinion, the procedures of physical verification of the inventory
followed by the management are reasonable and adequate in relation to the size of

14

the company and the nature of its business.

(iii) In our opinion, the company is generally maintaining proper records of its
inventories and no material discrepancies were noticed on physical verification.
3. On the basis of our examination of the books of account, the Company has
neither granted nor taken any loans, secured or unsecured, to / from
companies, firms or other parties covered in the register maintained under
section 301 of the Act.
4. In our opinion, there is generally an adequate internal control system
commensurate with the size of the Company and the nature of its business, for
the purchase of inventories and fixed assets and for sale of goods and services.
Further, on the basis of our examination of the books and records of the
company, we have neither come across nor have been informed of any
continuing failure to correct major weaknesses in the aforesaid internal control
system.
5. a) Based on the audit procedures applied by us, the particulars of contracts or
arrangements referred to in Section 301 of the Act that needed to be entered
into the register, maintained under the said section have been so entered
b) Where each of such transactions is in excess of Rs 5 lakhs in respect of
any party, the transactions have been made at prices which are prima facie
reasonable having regard to the prevailing market prices at the relevant time.
6. The company has not accepted any deposits from the public to which the
directives issued by the Reserve Bank of India and the provisions of section
58A and 58AA or any other relevant provisions of the Act and the Companies
(Acceptance of Deposit) Rules, 1975 apply.
7. In our opinion, the company has an internal audit system commensurate with
its size and nature of its business.
8. We have broadly reviewed the cost records maintained by the Company
pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed
by the Central Government of India under Section 209(1)(d) of the Companies
15

Act, 1956 and are of the opinion that prima facie the prescribed accounts and
cost records have been made and maintained. We have, however, not made a
detailed examination of the cost records with a view to determine whether
they are accurate or complete.
9. (i) The company is generally regular in depositing undisputed statutory dues
including provident fund, investor education and protection fund, employees
state insurance, income tax, sales tax, wealth tax, service tax, customs duty,
excise duty, cess and other material statutory dues as applicable with the
appropriate authorities during the year.
(ii) No undisputed amounts payable in respect of statutory dues were
outstanding as at March 31, 2013 for a period of more than six months from
the date they became payable.
(iii) There are no dues of income tax, wealth-tax, and customs duty which have
not been deposited on account of any dispute. Details of dues towards sales
tax, excise duty, service tax and cess that have not been deposited on account
of dispute are as stated below:
10.

The company does not have any accumulated losses as at March 31, 2013
and has not incurred any cash losses in the financial year ended on that date
or in the immediately preceding financial year.

11.

In our opinion, the company has not defaulted in repayment of dues to any
financial institution, bank or debenture holders during the year.

12.

The company has maintained adequate documents and records where it has
granted loans and advances on the basis of security by way of pledge of
shares, debentures and other securities.

13.

The Company is not a chit fund or a Nidhi / mutual benefit fund / society.
Accordingly, the provisions of clause 4(xiii) of the CARO are not applicable
to the Company.

14.

The company is not dealing or trading in shares, securities, debentures and

other investments. Accordingly the provisions of clause 4 (xiv) of the
16

CARO are not applicable to the company.

15.

The terms and conditions of guarantees given by the company, for loans
taken by others from banks or financial institutions, are not prima facie
prejudicial to the interest of the company.

16.

The term loans availed by the company were prima facie, applied for the
purpose for which they were obtained.

17.

On an overall examination of the financial statements of the company, funds

raised on short-term basis have, prima facie, not been used for long-term
investment.

18.

The company has not made any preferential allotment of shares during the
year.

19.

The company has created securities / charges in respect of debentures

issued.

20.

The company has not raised any money by public issues during the year.

21.

Based on the audit procedures performed and considering the size and
nature of the companys operations, no fraud of material significance on or
by the company has been noticed or reported during the year.

For M.S. Krishnaswami & Rajan

For Deloitte Haskins

& Sells

Chartered Accountants

Chartered Accountants

Registration No. 01554S

Registration No. 117366W

M.S. Murali
Partner
Membership No. 26453

A. Siddharth
Partner
Membership No. 31467

17

May 10, 2013

Chennai

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A. Market trends
Economy
Industrial sectors, too, continued to reel under the severe slowdown. The general
IIP index contracted for 6 months out of 11, the manufacturing index for 5 months
out of 11 and the mining index for 10 months out of 11. The general index,
therefore, grew by a low 0.9% during the period April to February. The
manufacturing index demonstrated a mere 1% growth during the same period.
The mining index showed a de-growth of 2.5%. As a result, CSO has estimated
manufacturing GDP growth of just 1.9% for the full year (2.7% last fiscal) and a
mining growth of 0.4% for the full year (-0.6% last fiscal).
Commercial Vehicle industry
Contrary to predictions made last year, the Commercial Vehicle (CV) industry fell
despite the Light Commercial Vehicle (LCV) category performing well. The
industry also saw the entry of new players into the market.
The overall CV market registered a de-growth of 2% in April-March 2013 as
compared to the corresponding period last year. The overall volumes went down
from 809,499 vehicles to 793,150, vehicles. The Medium & Heavy Commercial
Vehicles (M&HCVs) segment declined by 23% to an overall volume of 268,623
vehicles while the LCV segment grew at 14% to reach 524,887 vehicles.
2012-13 was also a poor year for Indian exports, with sale of commercial vehicles
dropping by 13% from 92,258 vehicles to 79,944 vehicles with key markets like
Sri Lanka dropping drastically and procuring more from China.
The Total Industry Volumes registered in 2011-12 and 2012-13 are provided
below:

18

The tepid economic environment and the high base, are bound to have an impact
on Total Industry Volume (TIV) in the coming fiscal. Several industry analysts
have projected growth rates at 4-8%. SIAM has projected an annual growth rate
of 3-5% for medium & heavy duty vehicles and about 12-14% for light vehicles.

B. Ashok Leyland - The year (2012-13) in brief Medium and Heavy

Commercial Vehicles
Against a backdrop of a major slump in the CV market, Ashok Leyland grew its
share in the domestic market in 2012-13 by 3%. Your Company sold 70,916
M&HCVs in the domestic market which was 13% less than the
previous year. This included 18,976 M&HCV buses and 51,940 M&HCV trucks,
10% less and 14% less respectively, compared to previous year.
Your Company grew market share across most segments and regions. One of the
biggest gains was in the ICV goods segment with your Company increasing its
sales volumes by nearly 55%, resulting in 5% gain in market share. It must be
noted that ICV goods, in the long term, remains one of the fastest growing
segments.
The Power Solutions Business earned revenues of `403 Crores in the year 201213, achieving a 27% increase compared to the previous year.
Spare Parts business grew by a healthy 18% in 2012-13, with an all time high
turnover of `1,004 Crores.
The Defence business suffered due to cut-backs and budget constraints of the
government resulting in sales of 275 vehicles and 2,463 kits reflecting a drop of
26% and 17% respectively.
In FY 2012-13, your Company produced 112,163 vehicles (including 35,401 nos.
of LCV Dost), a 9% growth compared to the previous year. Your Company
significantly expanded its dealer network especially in areas where hitherto it had
only limited coverage. Full service outlets grew to over 400 and, for the first time,
the number of outlets in North exceeded the number in South.
19

Light Commercial Vehicles Business

In 2012-13, your Company completed its first full year of participation in the fastgrowing LCV segment in India. The first product, Ashok Leyland Dost, has
contributed to transforming the SCV segment, by shifting the market emphasis
from sub 2 tonnes to 2-3.5 tonnes GVW. In FY 2012-13, your Company sold
close to 35,000 Dost vehicles. Today, Dost is the second largest selling product
in its segment, with a pan India market share of 18.5%, despite being launched
only in 11 States. In States where it is present, Dost enjoys market leadership
across most, and a market share of 25.6%. Your Company has also just started
exporting Dost to SAARC countries. To support the sale and service of LCVs,
your Company has built a new LCV-oriented network of 100 touch points within
18 months.
In the upcoming financial year, your Company is planning to launch several
variants of Dost including a CNG version, the Partner range of trucks and
buses in the 4-6T segment, and the Stile a Multi-Functional Vehicle for
commercial applications.
The Joint Venture Company, in which your Company is an equal partner with
Nissan, is preparing for a new manufacturing facility near Chennai dedicated for
LCV. Through these efforts, your Company would have a complete LCV product
portfolio by the end of 2013-14 to meet a variety of evolving customer
requirements.
C. Risk Management
Your Company had foreseen the drop in the demand of commercial vehicles both
in India as well as overseas and had mitigated the risk to an extent by enhancing
network coverage, especially in the Northern parts of the country and by
developing alternate International Markets other than SAARC during the previous
year. Your Company is also addressing this through a continued thrust on noncyclical businesses such as Spares, Defence and Engines. Further, your
Companys entry into the relatively less volatile LCV business has further derisked the business. The Company is also continually optimising fixed costs as
20

well as working capital, to stay protected in case of a downturn.

Legislation will continue to put pressure on improving the technology resulting in
higher investment and product cost. To address this issue, your Company has
proactively launched programs with its strategic partners to develop powertrains
to meet upcoming emission norms such as Euro 5 and Euro 6. Your Company has
also ensured that all its upcoming products meet all norms expected in the near
future, such as the bus body code, safety norms for trucks, etc. Finally, your
Company is continually developing and launching new and improved products to
stay ahead of competition.
Your Company has an established Enterprise Risk Management function that
engages with all the functions for risk assessment, ensures that the risk mitigation
plans are in place and validates the risk mitigation status regularly. Action plans
are incorporated into the corporate plans of your Company. The Audit Committee
reviews the Risk Management processes and the actions to mitigate the key
business risks are taken on a quarterly basis.
D. Internal Control Systems and their Adequacy:
Given the nature of business and size of operations, your Companys internal
control system has been designed to provide for:

Accurate recording of transactions with internal checks and prompt reporting

Adherence to applicable Accounting Standards and Policies

Compliance with applicable statutes, policies and management policies and

procedures

Effective use of resources and safeguarding of assets

The internal control system provides for well documented policies/guidelines,

authorisations and approval procedures. Your Company, through its own Internal
Audit Department, carries out periodic audits at all locations and functions based
on the plan approved by the Audit Committee and brings out any deviation to
internal control procedures. The observations arising out of the audit are

21

periodically reviewed and compliance ensured. The summary of the Internal Audit
observations and status of implementation are submitted to the Audit Committee
of the Board of Directors. The status of implementation of the recommendations
is reviewed by the Committee on a regular basis and concerns.
E. The Year Ahead
The first half is expected to remain sluggish for the commercial vehicle industry.
This is more due to protracted slowdown in Indias mining industry and sluggish
industrial output growth. However, the recent initiatives taken by the government,
budgetary announcements to spur growth as well as Governments determination
to pursue the reforms agenda announced earlier may revive the economy and
demand for commercial vehicles in the second half of the financial year.
In addition, increase in freight rate announced in the Railway Budget on bulk
movement such as cement is expected to shift a portion of the short haul segment
towards commercial vehicles.
Total industry volume is therefore estimated to grow marginally over previous
year. While truck sales will grow, bus sales will remain flat as JnNURM funding
is primarily expected to substitute traditional State Government purchases with
higher end buses rather than create incremental demand. Within buses, ICV
segment is expected to grow while medium duty vehicles will contract marginally.
Dost is expected to continue its strong run in 2013-14 as well. New products /
variants are lined up in the LCV segment.
Competitive intensity is likely to be more pronounced across segments. Despite
the increase in competitive intensity, Ashok Leyland will target for increased
market share supported by introduction of new products in second half of 2012-13
which are widely accepted in the market.
Your Company will continue to focus on increasing the production from
Pantnagar plant to avail of the concessions in excise duty and income tax, which
will favourably impact the bottom line.

22

BALANCE SHEET AS AT MARCH 31, 2013

Particulars
Note
No.

As at March 31, 2013

`
` Lakhs
Lakhs

As at March 31,
2012
`
Lakhs

EQUITY AND LIABILITIES

Shareholders funds
Share capital

1.1

Reserves and surplus

1.2

26,606.8
0
4,18,903.
66

Non-current liabilities
Long-term borrowings

1.3

Deferred tax liabilities (Net)

Other long-term liabilities
Long-term provisions

1.4
1.5
1.6

2,73,784.
18
52,736.6
9
177.85
7,851.26

Current liabilities
Short-term borrowings

1.7

Trade payables

1.8

Other current liabilities

1.9

Short-term provisions

1.10

26,606.80
4,45,510.46

2,29,335.11

3,34,549.98

76,698.2
5
2,48,536.
85
1,73,506.
34
30,868.3
3

49,036.69
7,656.30
2,86,028.10
10,175.00
2,57,096.72
1,75,004.83

5,29,609.77
13,09,670.2
1

TOTAL

3,94,625.82
4,21,232.62

42,037.44
4,84,313.99
11,91,574.71

ASSETS
Non-current assets
Fixed assets

Non-current investments

1.13

Long-term loans and advances

Other non-current assets

1.14
1.15

4,91,843.
42
36,344.8
6
56,261.8
3
12,630.9
1
5,97,081.
02
2,33,763.
19
47,969.5
5
1,203.21

1.16

1,89,602.

Tangible assets

1.11

Intangible assets

1.12

Capital work-in-progress
Intangible assets under
development

1.11

Current assets
Inventories

1.12

4,56,571.25
34,778.16
43,519.06
11,303.03
5,46,171.50
1,53,447.89

8,80,016.97

60,823.95
742.74
7,61,186.08
2,23,062.52

23

Trade receivables
Cash and bank balances

1.17
1.18

Short-term loans and advances

Other current assets

1.19
1.20

08
1,41,941.
13
1,394.24
89,098.0
4
7,617.75

1,23,076.42
3,255.58

4,29,653.24
13,09,670.2
1

TOTAL

72,657.43
8,336.68
4,30,388.63
11,91,574.71

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED

MARCH 31, 2013
Year Ended March 31,
2013

Particulars
Note
No.

` Lakhs

Year Ended March

31,
2012

`
Lakhs

` Lakhs

Income
Revenue from operations
Less: Excise Duty
Revenue from operations (Net)
Other income

2.1

2.2

13,29,855.
89
81,735.89
12,48,120.
00
6,235.15

Employee benefits expense

Finance costs

12,90,432.65
4,035.03
12,54,355
.15

Total Revenue
Expenses
Cost of materials consumed
Purchases of Stock-in-Trade - Traded
goods
Changes in inventories of finished
goods, workin-progress and Stock-in-Trade

13,72,080.50
81,647.85

2.3
2.4

7,53,941.6
4
1,31,173.9
4

12,94,467.68

9,12,148.33
50,737.37

2.5

2.6
2.7

27,197.69
9,12,313.2
7
1,07,551.3
4
37,688.57

(16,701.30)
9,46,184.40
1,02,039.42
25,525.32

24

Depreciation and amortization expense

2.8

Other expenses

2.9

38,078.35
1,40,608.5
6

Total Expenses
Profit before exceptional items and tax
Exceptional items

2.10

Profit before tax

Tax expense:
Current tax (Refer Note 3.13 to the
Financial
Statements)
Deferred tax
Profit for the period from continuing
operations
Earnings per share (Face value ` 1)

35,281.32
1,16,599.34
12,36,240
.09

12,25,629.80

18,115.06
28,955.61

68,837.88
159.78

47,070.67

68,997.66

7,752.00

3,700.00
3,700.00

4,648.00
12,400.00

43,370.67

56,597.66

1.63

2.13

CASH FLOW STATEMENT FOR THE YEAR ENDED

MARCH 31, 2013
March 2013

March 2012

` Lakhs

` Lakhs

47,070.67

68,997.66

38,078.35

35,281.32

571.31

(569.83)

(1,277.41)

1,072.60

(417.26)

(348.03)

(32,971.92)
4,016.31

(159.78)
26.55

Cash flow from operating activities

Profit before tax
Adjustments for :
Depreciation, amortisation and impairment - net of
capitalisation
Other amortisations
Foreign exchange (gains) / losses
Loss / (Profit) on disposal of tangible assets
Loss / (Profit) on sale of Long-term investments
Provision for diminution in value of Long-term

25

investments
Interest expense - net of capitalisation

37,688.57

25,525.32

Interest income

(3,324.34)

(1,373.33)

(756.27)

(906.06)

Dividend income
Operating profit before working capital changes

88,678.01 1,27,546.42

Adjustments for changes in :

Current liabilities and provisions

(16,994.37)

42,441.92

Trade receivables

(19,089.74)

(5,971.05)

Inventories

33,460.44

(2,172.18)

Loans and Advances

(3,110.52)

(33,550.09)

Other current assets

882.69

1,434.97

Cash generated from operations

83,826.51 1,29,729.99

Income tax paid

Net cash flow from operating activities

(10,996.55)
[A]

(14,998.63)

72,829.96 1,14,731.36

Cash flow from investing activities

Payments for acquisition of assets
Proceeds on sale of fixed assets
Proceeds from sale of Long-term investments
Purchase of Long-term investments
Interest received
Dividend received
Changes in Advances (Net)
Net cash flow used in investing activities

[B]

(64,916.21)

(69,783.90)

532.39

720.74

41,464.58

25,114.30

(92,824.28)

(55,429.27)

1,880.76

775.98

756.27

906.06

(3,325.54)
(1,16,432.0
3)

(8,055.94)
(1,05,752.0
3)

CASH FLOW STATEMENT FOR THE YEAR ENDED

MARCH 31, 2013
March 2013

March 2012

` Lakhs

` Lakhs

Proceeds from long-term borrowings

1,17,138.48

57,731.54

Repayments of long-term borrowings

(73,470.92)

(34,878.46)

Proceeds from short-term borrowings

10,26,932.92

1,17,832.98

Repayments of short-term borrowings

(9,60,561.17) (1,08,291.85)

Cash flow from financing activities

Debenture / Loan raising expenses paid

(1,135.29)

(896.44)

Interest paid - Net

(36,282.97)

(24,686.96)

Dividend paid and tax thereon

(30,923.05)

(30,923.05)

26

Net cash flow from financing activities

Net cash inflow / (outflow)

[C]

41,698.00

(24,112.24)

[A+B+C]

(1,904.07)

(15,132.91)

2,746.31

17,537.27

(61.15)

341.95

781.09

2,746.31

Opening cash and cash equivalents

Exchange fluctuation on foreign currency bank
balances
Closing cash and cash equivalents

CHAPTER 4: DATA ANALYSIS

Financial Review
Summary of Comparative Statement of Profit and Loss is given below.
` Crores
INCOME
Sales (net of excise

2012-13

2011-12

Inc/(Dec) %

12,481.20

12,904.33

(3.3)

duty)
Other income
Total

62.35

40.35

54.5

12,543.55

12,944.68

(3.1)

9,123.13

9,461.84

(3.6)

EXPENDITURE
Material Costs

27

Employee benefits

1,075.51

1,020.39

5.4

1,406.09
380.78

1,165.99
352.81

20.6
7.9

expense
Other expenses
Depreciation
and amortization
expense
Finance costs

376.89

255.25

47.7

12,362.40
181.15

12,256.30
688.38

0.9
(73.7)

Exceptional items

289.56

1.60

Profit before tax

470.71

689.98

(31.8)

Total
Profit before
exceptional items

Tax expense:
Current tax
Deferred tax
Profit after tax
Basic Earnings per
Share (`)

77.52

37.00

46.48

(20.4)

433.71
1.63

565.98
2.13

(23.4)
(23.4)

Revenues:
Your Companys revenues came through the following streams of business
activities:

Vehicles: Income from vehicles was at `9,503 Crores, a drop of 13% over the
previous year level of `10,961 Crores. The decrease in revenue was
attributable mainly to a 16% drop in vehicle sale volumes in 2012-13.
Considering the increase in cost of inputs and operations, Company revised
the prices on three occasions to register an increase of `47,000 per vehicle.

Engines: Revenue from engines increased to `403 Crores, a 27% increase over
the previous year level of `318 Crores, reflecting increase in sale volumes.

Spare Parts and others: Income from spare parts including sale of kits to
Vehicle Factory, Jabalpur, increased to `1,244 Crores, an increase of 6% over
the previous year level of `1,178 Crores.

Other operating income: Other operating income increased to `278 Crores

against `201 Crores in the previous year, registering a growth of 38%. This is
due to increase in contract manufacturing revenue from `26 Crores the
previous year to `118 Crores in current year reflecting a growth of 3.5 times

28

over previous year.

Revenue from services grew from `83 Crores in previous year to `138 Crores
in the current year mainly due to increase in revenue from annual maintenance
contracts.

Revenue from trading operations also went up significantly during the year to
`915 Crores from `163 Crores in the previous year primarily due to the sale of
Dost vehicles.

Costs:

Material Cost: There were material cost increases experienced in the first
two quarters. However, the cost pressures subsided in the second half of FY
12-13, leading to marginal increase of about 0.2% in overall material costs for
full year. Your Company did take pricing actions at appropriate times to offset
the material cost increases.

Staff Costs: Employee expenses went up by 5% in 2012-13 primarily due to

increase in executive strength.

Other expenses were higher by 20% primarily due to higher incurrence in

power and fuel consumption to cope with higher power cuts / tariff increases,
publicity spends and R&D expenditure.

Depreciation for the year increased to `381 Crores compared to `353 Crores
in the previous year primarily due to full year impact of last year additions and
higher level of capitalisation in the current year, mainly at Pantnagar and IT
infrastructure.

Finance costs increased to `377 Crores during the year from `255 Crores, in
the previous year. To part fund the capital expenditure and investment
requirements, your Company borrowed `1,150 Crores (NCD `600 Crores and
balance ECB loans) during the year. Interest cost on the fresh loans together
with the full year impact of the loans availed by the end of 2011-12 resulted in
higher finance charges. In addition, significant increase in working capital

29

during April 2012 to March 2013 due to an uncertain business environment,

led to higher level of short term borrowing which contributed to higher
interest costs.
Capital Employed
Total capital employed by your Company increased by 10% from `11,916 Crores
to `13,097 Crores, mainly due to investments in joint ventures and facility
creation.Total shareholders funds as at March 31, 2013 stood at `4,455 Crores of
which equity capital accounted for `266 Crores, compared to the previous years
total shareholders funds of `4,212 Crores.
Summary of Balance Sheet is given below.
` Cr.
SOURCES OF
FUNDS
Shareholders Funds
Non - current
liabilities
Current liabilities
Total
APPLICATION OF
FUNDS
Fixed Assets
Investments
Loans & other Non
Current Assets
Current assets
Total

31.03.2013

31.03.2012

Inc/(Dec) %

4,455.10
3,345.50

4,212.33
2,860.28

5.8
17.0

5,296.10
13,096.70

4,843.14
11,915.75

9.4
9.9

5,970.81
2,337.63
491.73

5,461.72
1,534.48
615.66

9.3
52.3
(20.1)

4,296.53
13,096.70

4,303.89
11,915.75

(0.2)
9.9

Capital Expenditure and Investments

During the year, your Company incurred `725 Crores towards capital expenditure,
mainly towards development of additional infrastructure and other facilities at
Pantnagar for setting up integrated manufacturing facilities. Your Company also
incurred capital expenditure relating to the manufacturing facility for LCV at
Hosur under joint venture with Nissan Motors, Japan. Your Company also
incurred capital expenditure towards implementing a new ERP system. The rest of
the capital expenditure was towards capacity optimisation programmes in existing
plants.
During the year, your Company invested `80 Crores in AL-Nissan JV and `50

30

Crores in AL-John Deere JV. Your Company invested `90 Crores in Hinduja
Leyland Finance Ltd. Further your Company invested `300 Crores in Hinduja
Foundries Ltd. and another `187 Crores in Hinduja Energy (India) Ltd. In all, your
Company invested `862 Crores by way of investment in Associate / Group / Joint
Venture Companies.
Current Assets as at March 31, 2013 was `4,297 Crores compares with previous
year level of `4,304 Crores. Short term loans and advances increased by `164
Crores. Inventories decreased to `1,896 Crores as at March 31, 2013 compared to
`2,231 Crores as at March 31, 2012 mainly due to decrease in finished vehicle
inventory. Trade Receivables increased to `1,419 Crores as at 31st March 2013
from `1,231 Crores as on 31st March 2012 mainly due to higher quantum of
vehicles sold to State Transport Undertakings in March 2013.
Liquidity
Your Company continued with the Cash and Carry system of sales during the
year which has been effective since May 2009. This has enabled your Company to
better manage the increased liquidity requirements. During the year, your
Company raised ECB loan of USD 110 Mn and placed NCDs to the tune of `600
Crores which are secured by a first pari passu charge on select immovable
properties and movable assets. These funds were utilised for capital expenditure
and investments described earlier. Your Company manages its liquidity through
rigorous weekly monitoring of cash flows.
Profitability
Your Companys profitability remained subdued due to lower volumes. The
general economic slowdown adversely impacted the volumes. In spite of lower
volumes, your Company produced 28,870 vehicles from Pantnagar, achieving
proportionately increased benefits on account of exemptions from levy of excise
duty and income tax. Your Company managed to contain material cost at about
the previous year levels and granting increases only for unavoidable reasons like
power tariff increases, etc. Presently, your Companys debts have been rated by
ICRA. The rating agency has reaffirmed the Companys ratings with a negative
31

outlook During the year, your Company has serviced all its debt obligations on
time.
Results of Operations
Your Company generated an after tax profits from operations of `777 Crores.
After meeting the working capital requirements, your Company registered a net
cash inflow of `728 Crores from its operations.
Cash outflow for acquisition of assets and investing activities for 2012-13
amounted to `1,164 Crores as against outflow of `1,058 Crores in 2011-12. Fresh
loans for `1,150 Crores were raised to meet capital expenditure and investment
activities.
Profit before tax and exceptional items stood at `181 Crores. Your Company sold
shares of ICICI Bank Ltd., IndusInd Bank Ltd. and Hinduja Leyland Finance Ltd.
during the year and booked long term capital gains of `335 Crores which is
recognised as an exceptional item in the statement of Profit and Loss Account.
Your Company also provided for impairment in carrying value of investments in
Ashley Alteams (`28 Crores) and Automotive Infotronics (` 11 Crores).After
providing for taxes at `37 Crores of deferred tax, Profit after tax for the current
year stood at `434 Crores. The earning per share decreased by 23% from `2.13 in
2011-12 to `1.63 in the year under review.

CHAPTER 5: FINDINGS, RECOMMENDATION & CONCLUSION

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with accounting standards issued by the
Accounting Standards Board and published by The Institute of Chartered
Accountants. The directors to prepare financial statements for each financial
period which give a true and fair view of the state of affairs of the company and of
the profit or loss of the company for that period.
In preparing these financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently

32

make judgments and estimates that are reasonable and prudent

prepare the financial statements on the going concern basis unless it is

inappropriate to presume that the Company will continue in business
An annual report is a comprehensive report on a company's activities

throughout

the

preceding year.

Annual

reports

are

intended

to

give shareholders and other interested people information about the company's
activities and financial performance.
Other information deemed relevant to stakeholders may be included, such
as a report on operations for manufacturing firms or corporate social
responsibility reports for companies with environmentally or socially sensitive
operations.
The details provided in the report are of use to investors to understand the
company's financial position and future direction.
From overall study of this project; we understood what is meant by
annual report, what is directors report, what is auditors report, what is
management discussion & analysis report & it also help to analysis the financial
statement of a company

BIBLIOGRAPHY:
www.ashokleyland.com/sites/.../annual_report/annualreport2012_13.pdf
www.ashokleyland.com/
en.wikipedia.org/wiki/Ashok_Leyland
economictimes.indiatimes.com

33